Labor law in Lithuania: how to hire and fire employees in Lithuania: Chapters from Multilaw book „How to Hire and Fire in 96 Jurisdictions"
1. GENERAL PRINCIPLES
Forums For Adjudicating Employment Disputes
The Labour Disputes Commission has exclusive jurisdiction for most claims, but in certain cases and when the parties fail to reach the agreement in Labour Disputes Commission, the case can be brought in the civil court (Circuit Court depending on defendants residence address). An employee is entitled to appeal to the court against decisions of the Labour Disputes Commission.
The Main Sources Of Employment Law
The sources of employment law are the Constitution of Lithuania, international agreements of Lithuania, the Labour Code, other legislation and regulatory provisions of collective agreements. Government resolutions and other regulations may regulate labour relations only in such cases as and to the extent determined by the Labour Code and other laws.
National Law And Employees Working For Foreign Companies
Statutory rights under national law will usually apply to all individuals physically working in Lithuania. Foreign law will be applied to labour relations where this is established by the international agreements of Lithuania, Lithuanian laws or agreements between the parties to the employment contract. Therefore parties to the employment contract may also choose the law applicable both to the entire employment contract and to a part thereof.
National Law And Employees Of National Companies Working In Another Jurisdiction
Statutory rights under national law will usually apply when the employee is physically working within the Lithuanian jurisdiction. However parties to the employment contract may also choose the law applicable both to the entire employment contract and to a part thereof.
- 2. HIRING THE EMPLOYEE
Legal Requirements As To The Form Of Agreement
An employment contract must be concluded in writing according to the model form. Two copies of the written employment contract must be drawn up and signed by the employer (or his authorised person) and by the employee. One signed copy must be handed to the employee, whereas the other copy must be kept by the employer. The employment contract must, on the same day, be registered in the employment contracts record book. Such a book is not mandatory if the employer is a person employing three or less employees.
Before the commencement of work, the employer must issue an identity card (work certificate) to the employee. The model form of employment contract, the registration rules, the form of an employee’s identity card, the procedure for its issuance, and its carrying and presentation to control institutions is all regulated by the Lithuanian Government.
An employer is responsible for the proper drawing up of an employment contract. When concluding an employment contract, the employer or his authorised person must ensure the person being employed is aware of the terms of his perspective employment, the collective agreement, work regulations, and any other acts regulating his work, which are in force at the workplace. Unless otherwise agreed by the parties, the employee must commence his work on the next day following the conclusion of the employment contract.
- Trial Period
The parties may agree on a trial period. It may be used to assess the suitability of an employee for the agreed work, as well as, at the request of a person taking on a job to see if the job is for him. The trial period must be set in an employment contract. A trial period may not be longer than three months. Longer trial periods may be applied in certain cases specified by laws but the trial period cannot exceed six months.
A trial to assess the suitability of an employee for the agreed work may not be established when employing persons: 1) under 18 years of age; 2) to a post by competition or elections, as well as those who have passed qualification examinations for a post; 3) due to a transfer by agreement between employers, to work for another employer; 4) in other cases specified by labour laws. If an employer is not satisfied with the performance of an employee during the trial period, he may dismiss the employee from work before the expiry of the trial period by giving the employee 3 days written notice, without paying him a severance pay.
- Hours Of Work
Working time may not exceed 40 hours per week. A daily period of work must not exceed 8 working hours. Exceptions may be established by laws, Government resolutions and collective agreements. Maximum working time, including overtime, must not exceed 48 hours per 7 working days.
Employees working in specific sectors (e.g. health care, care (custody), child care institutions, specialised communications services and specialised accident containment services and security may be required to work up to 24 hours per day. The duration of working time of such employees must not exceed 48 hours per seven-day period, and the rest period between working days must not be shorter than 24 hours. The list of such jobs is approved by the Government. For employees employed in more than one undertaking or in one undertaking but under two or more employment contracts, the working day (including breaks to rest and to eat) may not be longer than 12 hours.
There is a restriction prohibiting employees from earning below a minimum hourly wage, which in Lithuania currently is 800LTL (232 EUR) per month and minimal hourly rate – 4.85 LTL (1.4 EUR). Both of the rates are shown before taxes.
The Governmental Decision ruling the above rates was adopted on 17th December, 2007 and has not changed since.
- Holidays/Rest Periods
The minimum annual holiday is normally a period of 28 calendar days. 35- days holiday are granted to certain groups of employees (under 18 years of age, single parents, disabled persons, etc.) Annual leave may not be shortened for part-time employees.
The holiday for part time employees is calculated proportionally to how much they work, however annual holiday may not be shortened for part-time employees and must last at least 28 calendar days.
- Minimum/Maximum Age
The minimum age is 16 (which can be varied in certain cases), below which employees cannot work. There are no maximum age limits.
An employer may request an applicant to undergo a health examination. Disabled persons as well as ill persons in the meaning of Lithuanian labor laws enjoy wider protection in the employment relations.
- Location Of Work/Mobility
The employee's normal place of work can be specified by the employer in the employment contract. Mobility clauses can be included in the contract of employment, but they cannot be operated unreasonably. Where the job requires travel to other temporary locations, it is normal for the employer to reimburse all reasonable travel expenses.
- Pension Plans
A person qualifies for state social insurance old-age pension if he is a permanent Lithuanian resident, attains the retirement age as specified by the law and has the minimum 15 year social pension insurance record. Additionally may have a private Pension Fund (particular pension scheme) and transfer 2% of his/her state social insurance payment to that fund.
- Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
A range of "family-friendly" rights are widely available to employees. Women are entitled to maternity leave of 70 calendar days before child birth and 56 calendar days after child birth (in the event of complications or the birth of two or more children – 70 calendar days). This leave is added up and granted to the woman as a single period, regardless of the days used prior to the birth.
Employees who have adopted newly born babies, or who have been appointed as their guardians, are granted leave for the period from the date of adoption, or guardianship, before the baby is 70 days old. Parental leave before the child has reached the age of three is available to the mother/adoptive mother, father/adoptive father, grandmother, grandfather, guardian or any other relatives who is actually raising the child.
Employees who have adopted newly born babies, or who have been appointed as their guardians, are granted leave for the period from the date of adoption, or guardianship, before the baby is 70 days old. Lithuanian Labour Code does not provide adoption leave for parents adopting a baby who is older than 70 days. However the parties to the employment relationship may agree on more beneficial conditions than is prescribed by law.
- Compulsory Terms
In every employment contract, the parties must agree on the essential terms of the contract: the employee’s place of work (enterprise, establishment, organisation, structural subdivision, etc.), and job functions. In respect of certain types of employment contracts labour laws and collective agreements may also provide for other essential terms, which are agreed by the parties in concluding such an employment contract (agreement on the term of the contract, the nature of seasonal work, etc.).
In every employment contract, the parties must agree on the terms of remuneration for work (system of remuneration for work, amount of wages, payment procedure, etc.). Other terms of an employment contract may be established by agreement between the parties unless labour laws, other regulatory acts or the collective agreement prohibit doing so (trial, combination of professions, liability, etc.).
- Non-Compulsory Terms
The employer and the employee are free to agree on any other terms in addition to the compulsory provisions. It is worth mentioning that parties to the employment agreement may agree on more favourable employment regime than established by Lithuanian laws. However it is highly advisable to include the agreed provisions in an employment contract.
Types Of Agreement
Employment contracts may be non-term, fixed-term, temporary, seasonal, on additional work, secondary job, with home workers, on the supply of services and other. As a rule, an employment contract is concluded for an indefinite period of time (non-term).
There are rules relating to secrecy and confidentiality that are implied into the employment relationship.
Upon written agreement during the employment relationship an employee is under duty to respect the confidentiality of the employer's commercial and business information.
After employment, confidential information as well as trade and profession secrets are protected by the implied duty of confidentiality.
In addition to the above duties, employers will often include in the employment contract or in a separate document an express term specifying the type of information that is a trade secret, and therefore protected, to prevent future disclosure.
Ownership of Inventions/Other Intellectual Property (IP) Rights
In the absence of any contractual terms, there are statutory provisions which will apply to determine ownership of IP rights.
There is a certain procedure which shall be applied when employing a non-national. One month prior to employment commencing, the Lithuanian registered enterprise must register vacancies at the local labor exchange and apply for the issue of a work permit. In cases where the established company in the republic of Lithuania is bankrupt the right to apply for the work permit is not possible. The procedure goes as follows: labor exchange passes a positive decision and its conclusion is submitted to the Lithuanian Labor Exchange, which passes a final decision and issues a work permit to the non-national. The application, depending on qualification of the future non-national employee may take from one to two months. If the application is approved, the work permit for a non-national employee will be valid for 2 years.
Hiring Specified Categories Of Individuals
There are restrictions on who can be employed to carry out certain hazardous activities and restrictions on the types of work that vulnerable groups (e.g. children or pregnant women) can be required to undertake.
Outsourcing And/Or Sub-Contracting
It is prohibited to refuse to employ a person if there is a written agreement between employers concerning the transfer of an employee to another workplace. The employees must generally remain on exactly the same terms of employment as they enjoyed prior to the transfer.
Additionally to this, it is important to note that uninterrupted period of service covers the period of employment in one enterprise, establishment, organisation or several enterprises, establishments or organisations if the person is transferred from one place of employment to another by agreement between the employers or on other grounds without interrupting the length of service or provided that the break in employment is within the set time limits.
- 3. MAINTAINING THE EMPLOYEE RELATIONSHIP
Changes To The Contract
In the event of changes in production, its scope, technology or labour organisation, as well as in other cases of production necessity, an employer is entitled to change the conditions of an employment contract. If an employee does not agree to work under the changed working conditions, he may be dismissed by the Employer subject to the dismissal procedure set out in the employment contract.
The essential conditions of an employment contract such as the employee’s place of work (enterprise, establishment, organisation, structural subdivision, etc.), or job functions, may be changed with the prior written consent of the employee. An employer may change remuneration for work without the written consent of an employee but only in the case when remuneration for a specific sector of employee is changed by laws, Government resolutions or under the collective agreement. In the event of changes in remuneration, wages cannot be reduced without the written consent of an employee.
Change In Ownership Of The Business
Changes in the ownership of an enterprise, establishment or organisation, subordination, change of name, any merger or division forming a new enterprise, establishment or organisation, may not be a legitimate reason to terminate employment relations.
When there is a change in ownership of a business (except a change merely in the shareholding ownership), all employees are normally transferred to the new employer on the same terms and conditions.
Social Security Contributions
Employers and employees are required to make social security contributions. During employment the employer will be liable for paying the following tax: (i) social insurance contributions counted from the gross salaries at the rate of 30.98 %; (ii) payment to the guarantee fund counted from the gross salaries of 0.1%. Employees are entitled to pay (i) 15% of personal income tax, (ii) obligatory insurance tax of 6% and (iii) 3% for the social insurance. Employers are required to contribute towards allowances payable to employees during their employment. These allowances include sick pay, maternity pay and paternity pay etc.
Accidents At Work
Safety and health at work means that an employer must adopt preventive measures in order to ensure employees are safe at work. It is the responsibility of an employer to ensure safety and health at work. Taking into account the size of an enterprise and the risks to employees, the employer must establish or hire a certified occupational safety and health service or performs this function himself. The Ministry of Social Security and Labour the Ministry of Health, in compliance with the Constitution of the Republic of Lithuania, Labour Code, other laws, Government resolutions and other regulatory acts, implement the state policy in the sphere of employee health and safety. The State Labour Inspectorate ensures that employers comply with employee health and safety requirements. The functions, rights and responsibility of the State Labour Inspectorate is established by the Law on State Labour Inspectorate.
The employee who has lost his functional capacity as a result of an accident at work or occupational disease which resulted in the loss of income will be compensated for loss of income in accordance with the Law on Social Insurance against Accidents at Work and Occupational Diseases and other laws. If the injured employee is not covered by this social insurance, the income lost and medical aid and treatment costs as well as the expenses related to the victim’s social, medical and professional rehabilitation will be compensated by the employer in accordance with the procedure established by the Civil Code.
Discipline And Grievance
The discipline and grievance procedure applicable to employees is defined by work regulations. These regulations are approved by the employer subject to the approval of the employee representative.
Employees are protected from discrimination on grounds of sex, age, sexual orientation, marital status, race, religion or belief, disability and etc.
Discrimination may occur before the employment relationship commences (for example in advertising the job), during the employment (for example in failing to promote), on termination or even after the employment has ended (for example in writing the reference).
When applying the work classification system for determining the wage, the same criteria must be equally applied to both men and women, and the system must be developed in such a way so as to avoid discrimination on the grounds of sex.
The Office of Equal Opportunities Ombudsman, which is an independent state institution, is one of the key institutions within the equal opportunities and gender equality machinery. It takes overall responsibility for the supervision and implementation of the Law on Equal Opportunities for Women and Men (1998) and the Law of Equal Treatment (2005) in Lithuania. The Ombudsman investigates individual complaints on the grounds of gender, age, racial or ethnic origin, religion and beliefs, disability, sexual orientation, language, social status. The Ombudsman submits recommendations and proposals to Parliament, governmental institutions on the priorities of gender equality policy, which includes recommendations on amendments to relevant legislation.
Compulsory Training Obligations
There are no compulsory training obligations for employees generally, but obviously some trades/professions will impose their own standards/expectations.
It is possible for employers to offset earnings against employee's debts. However, the employer may only make a deduction from the employee's wages if it is required or permitted by a statutory or contractual provision or the employee has given his prior written consent to the deduction.
Payments For Maternity And Disability Leave
The amount of maternity pay is calculated on the basis of the employee's income received within 12 calendar months prior to the month leave began. Where more than one child is born, the amount of maternity allowance shall be increased according to the number of children born (if two children are born, the allowance amount shall be doubled, if three children are born - the allowance amount shall be tripled, etc.).
The minimum monthly is one third of the employee's income for the current year. The maximum monthly amount of maternity pay shall be equal to a sum 5 times the employee's income received in the current year.
Employees who have temporarily lost their functional capacity will retain their position and duties if they are absent from work due to temporary loss of functional capacity for a maximum of 120 successive days or 140 days within the last 12 months. In certain circumstances provided for by law and other regulatory acts, the position and duties shall be retained for a longer period.
Sickness allowance is paid by the employer for the first 2 days and cannot be less than 80% but cannot be more than 100% of employees’ wage. Sickness allowance from State Social Insurance Fund is paid from the third to the seventh day at 40% of the employee's wage. From the eighth day sickness pay is 80% of employee's wage.
Please see social security contributions.
Absence For Military Or Public Service Duties
Employees are entitled to take leave for military or public service duties. Working time does not include time taken for the performance of state, public or citizen's duties, military service or military training.
Works Councils or Trade Unions
The rights and interests of employees may be represented and protected by the trade unions. Where an enterprise, agency or organisation has no functioning trade union and the staff have not transferred the function of employee representation and protection to the trade union, the employees shall be represented by a labour council which is elected by secret ballot at the general meeting of the staff. The same person cannot represent and protect the interests of both the employees and the employers. When protecting the rights of the employees, trade unions are guided by laws regulating trade union activities, the Labour Code and their respective regulations. The status of labour councils and their formation are established by law. The labour council possesses all rights of the trade union where there is no functioning trade union in the company. The labour council may not perform functions recognised under laws as the prerogative of trade unions.
Employees’ Right To Strike
The employees and their representatives have the right to organise and manage strikes.
Employees On Strike
Employees strike if a collective dispute is not settled or a decision adopted by the Conciliation Commission, Labour Arbitration or third party court, is acceptable to the employees, but is not being implemented by the employer.
The right to adopt a decision to declare a strike (including a warning strike) is vested in the trade union according to the procedure laid down in its regulations.
The employer must be given an at least seven days' written notice of the beginning of the intended strike or warning strike. When a strike is declared, only the demands which were not met during the conciliation procedure may be put forward. A warning strike lasting no longer than two hours may be held before the strike is declared. The decision to call a strike shall specify: 1) the employees demands with respect to why the strike has been called; 2) when the strike will begin; and 3) the body leading the strike.
The law sets out the situation where longer notification is required to be given to the employer and the circumstances where strikes are not permitted.
Employers’ Responsibility For Actions Of Their Employees
Liability is incurred when one party to a labour relationship causes damage to another party through non-performance of work duties or by performing them unsatisfactorily. Liability is incurred when all the following conditions are present: 1) damage has been caused; 2) damage has been caused through illegal activity; 3) there is a causal relationship between an illegal activity and damage; 4) the offender is guilty; 5) the offender and the victim were in a labour relationship during the violation of law; 6) the resulting damage relates to work activities.
- 4. FIRING THE EMPLOYEE
Procedures For Terminating the Agreement
In all cases the termination of an employment contract must comply with the terms of the contract. In most cases, there are certain minimum steps which must be followed before termination to avoid the termination amounting to an unfair dismissal. An employer must be able to demonstrate a "potentially fair" reason for dismissal.
An employment contract will expire: 1) upon the termination thereof on the grounds established by the Labour Code and other laws (termination of the employment contract by mutual agreement, upon contract’s expiry, upon the notice of employee, due to circumstances beyond the Employees control, on the initiative of an Employer without any fault on the part of an Employee; 2) upon the liquidation of an employer without legal successor; and 3) upon the death of an employee.
For every type of termination the procedural requirements differs.
An employment contract must be terminated without notice in the following circumstances: 1) upon an effective court decision, or when a court judgement impose a custodial sentence on the employee, which prevents him from continuing his work;2) when an employee is deprived of special rights to perform certain work in accordance with the procedure prescribed by laws; 3) upon the demand of bodies or officials authorised by laws; 4) when an employee is unable to perform these duties or work in accordance with an opinion of the medical commission or the commission for the establishment of disability; 5) when a parent, statutory representative, doctor or school of an employee between the age of 14 and 16 years demands that the employment contract be terminated; 6) upon the liquidation of an employer.
An employment contract will expire upon the death of an employer if the contract was concluded for the supply of services to him personally, as well as when the employer has no legal successor.
An employer will be entitled to terminate an employment contract without giving an employee prior notice under the following circumstances: 1) when the employee performs his duties negligently or commits other breaches provided that disciplinary sanctions were imposed on him at least once during the last 12 months; 2) when the employee commits a gross breach of duties.
An employee is entitled to terminate a non-term employment contract, as well as a fixed-term employment contract, prior to its expiry by giving his employer written notice of at least 14 days. The collective agreement may set a different period of notice, but it shall not exceed one month.
Termination On Notice
An employer may terminate a non-term employment contract with an employee only for valid reasons and by giving him notice in accordance with the procedure established by law. The general notice period is 2 months, but for special groups of persons (disabled persons or persons raising children under 14 years of age etc.) the notice period is 4 months. The dismissal of an employee from work without any fault on the part of the employee concerned will be allowed if the employee cannot, with his consent, be transferred to another work.
Reasons for dismissal which are related to the qualification, professional skills or conduct of an employee, are recognised as valid. An employment contract may also be terminated on economic, technological grounds or due to the restructuring of the workplace, as well as for other similar valid reasons.
Termination By Reason Of The Employee's Age
Termination by reason of the employee's age is discriminatory.
Automatic Termination In Cases Of Force Majeure
The death of the employee shall be understood as the automatic termination of the employment relations.
Termination By Parties’ Agreement
One party to an employment contract may put forward in writing to the other party that the employment contract be terminated by agreement between the parties. If accepted the parties must agree to termination within seven days of the option being put forward. Having agreed to terminate the contract, the parties conclude a written agreement on the termination of the contract. This agreement indicates the date when the contract will be terminated as well as other conditions of the termination of the contract (compensation, granting of unused leave, etc.).If the other party fails, within the time period of 7 days, to inform the other party that it agrees to the termination, the offer to terminate the employment contract by agreement is considered rejected.
Directors Or Other Senior Officers
There are no special rules which relate to the termination of a director or other senior officer's employment, but in the case of a statutory director (or other company officer), termination of employment does not automatically bring to an end the directorship. Separate steps will be required to bring the directorship to an end (pursuant to the company's articles of association).
Special Rules For Categories Of Employee
There are no categories of employee to whom special rules apply, but certain categories (e.g. disabled employees, employees raising children) benefit from more generous rules of protection from unfair dismissal or enjoy longer notification periods – up to 4 months. For certain categories of employees the termination of employment contract is not allowed at all (for instance pregnant women, employees raising a child under 3 years of age etc.)
Specific Rules For Companies in Financial Difficulties
An employment contract may be terminated on economic, technological grounds or due to the restructuring of the workplace, as well as for other similar valid reasons. However the Employer must establish the fact that company is in financial difficulties. An employee will be entitled to terminate a non-term employment contract, as well as a fixed-term employment contract for a period exceeding six months, if the employee has no work over 30 successive days or if it amounts to over 60 days in the last twelve months. The employee can also terminate the contract if the employee is not paid his full monthly wage for over two successive months. The employment contract must be terminated from the date indicated in the employee’s request. This date must be at least three days after the submission of the request.
Restricting Future Activities
The Labour Code is silent on possible restrictions of future activities, however, if such restrictions apply they must be designed to protect a 'legitimate business interest' and they should be no wider than is necessary to protect those interests. Further they must be clear and reasonable in time and area.
Upon the termination of the employment contract the dismissed employee must be paid a severance pay in the amount of his average monthly wage taking into account the continuous length of service at that workplace provided the employee is not at fault. If the employee has worked under 12 months he is entitled to one month's average wage; 12 to 36 months he is entitled to two month's average wage; 36 to 60 months he is entitled to three month's average wage; 60 to 120 months he is entitled to four month's average wage; 120 to 240 months he is entitled to five month's average wage;) over 240 months he is entitled to six month's average wages. Upon the termination of an employment contract in other cases without any fault on the part of the employee concerned, he will be paid a severance pay in the amount of two month's average wage, unless otherwise provided by law or collective agreement.
If it is established that the working conditions were changed, the employee was suspended from work without a valid reason or in breach of law, the violated rights of the employee must be restored and he must recover the average work pay for the entire period of involuntary idle time or the difference in the work pay for the time period the employee was employed in a lower paid job.
Special Tax Provisions And Severance Payments
Severance payments are subjected to personal income tax.
Allowances Payable To Employees After Termination
Employers are not required to contribute to any allowances payable to employees after termination.
Time Limits For Claims Following Termination
An employee who disagrees with the changing of the working conditions, suspension from work on the employer's initiative or dismissal from work is entitled to apply to the court within one month from the day of receipt of the appropriate notice (document).
- 5. GENERAL
Specific Matters Which Are Important Or Unique To This Jurisdiction
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